Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
Different Cost of Capital with Changed Proportions: It is quite possible that the specific costs of capital of different sources may be affected by the amount of funds' raised and the proportion of a particular source may also change as a result of new funds. Consequently, the WMCC may also change and vary differently. For example, following is the capital structure of firm:
Now suppose, the firm has an investment proposal of Rs. 10,00,000 and expect to generate retained earnings of Rs. 2,00,000 from the current operations. The remaining funds are raised by the issue of Equity share capital (Rs. 6,00,000 at 12%) and 12% Bonds (Rs. 2,00,000). The WMCC of the firm can now be ascertained as follows:
WMCC =.6 (.12) +.2 (.11) +.2 (.06) = .106 or 10.6%.
The WACC of the firm can now be calculated as follows:
Source
Amount (Rs.)
Weight
C/C
Weight )( C/C
Equity share capital
25,00,000
.417
.11
.0458
6,00,000
.100
.12
.0120
Retained earnings
12,50,000
.208
.105
.0228
2,00,000
.033
.0036
11 % Debentures
.209
.055
.0115
12% Debentures
.060
.0020
60,00,000
1.000
.0977
The WACC of the firm is .0977 or 9.77%. So, the WACC has increased from 9.6% to 9.77% as a result of WMCC of 10.6% (which was higher than the then WACe). So, the WMCC has lifted the WACC.
Do these two problems in Excel. Balance Sheet and Income Statement. The following information is used for the first two problems. Problem 1 is the income statement and problem 2
Compare diversifiable and nondiversifiable risk. Which do you think is more important to financial managers in business firms? Diversifiable risk is able to be dealt with by of
1. role financial intermediaries 2. nature and role of money markets
Q. Explain a variety of factors determining Dividend Policy? Dividend: - Dividend demotes to that part of net profits of a company which is distributed between shareholders as
Evaluation of money-market hedge Expected receipt after 3 months = $300000 Dollar interest rate over three months = 5.4/ 4 = 1.35% Dollars to borrow now to have $300000 l
Let us consider a situation wherein a position in an interest rate dependent asset such as a bond portfolio or a money market security is hedged by using an interest ra
SHAREHOLDER VALUE There are various measures used by market analysts and financial experts to derive the maximum Shareholder Value of a particular company but we would take the
Define the terms- Mergers and takeovers The terms takeovers and mergers are inter-related. When a company attains the majority of shares of another company, acquired company is
Great Pumpkin Farms just paid a dividend of $3.50 on its stock. The growth rate in dividends is expected to be a constant 5 percent per year indefinitely. Investors require a 16 p
WHAT IF BALANCE DOES NOT EXIT
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +1-415-670-9521
Phone: +1-415-670-9521
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd